TAPPING THE AGRO-VALUE CHAIN: LESSONS FROM RECENT MOZAMBIQUE EXPERIENCE

1. TAPPING THE AGRO-VALUE CHAIN: LESSONS FROM RECENT MOZAMBIQUE EXPERIENCE UNIVERSIDADE EDUARDO MONDLANE Professor Firmino G. Mucavele PhD Agrivultural Economics and Natural Resources firmino.mucavele@att.net firmino.mucavele@uem.mz http://www.firmino-mucavele.net Professor Firmino G. Mucavele

2. CONTENT Professor Firmino G. Mucavele A Brief Overview of Agriculture in Mozambique; Agro-Value Chain: Lessons from Mozambique; Strengths, Weaknesses, Opportunities in Agro-DevelopmentLinks; Some Lessons and the Way Forward

3. OBJECTIVES Professor Firmino G. Mucavele Present a brief overview of agriculture in Mozambique; Analyze the strengths, weaknesses and opportunities of agricultural value chains in Mozambique; Evaluate agricultural-value chain systems; and Reflect on alternative ways to increase productivity, develop markets, and build up competitiveness to improve incomes and reduce poverty in Mozambique.

4. Source: IIAM (2007) Professor Firmino G. Mucavele

5. Overview of Agricultural Sector in Mozambique Professor Firmino G. Mucavele

6. Overview of Agricultural Sector in Mozambique • About 3.3 million hectares of land can be irrigated, only about 114,000 hectares of land (0.13%) are under irrigation, ; • The common denominator of the smallholder farmers is low productivity, limited ability of households to generate savings and food insecurity; • About 75% of the smallholder farmers are resource-poor; Professor Firmino G. Mucavele

7. Overview of Agricultural Sector in Mozambique 4. Most agricultural production is under rainfed conditions; 5. agro-dealers in Mozambique lack capital to purchase agricultural inputs, particularly fertilizers and improved seed; 6. The current structures, systems and procedures of commercial finance institutions do not lend themselves to viable rural banking; Professor Firmino G. Mucavele

8. Overview of Agricultural Sector in Mozambique 7. High interest rates have led to inadequate investment, resulting in shrinking agro-industries; 8. Smallholder producers now rely primarily on informal; 9. Low returns in agriculture and weak financial/ capital markets are felt as being the major reasons for lack of investment for agriculture. Professor Firmino G. Mucavele

9. Overview of Agricultural Sector in Mozambique 10. Many farmers are still facing major problems of access to both local and international markets, as well as poor availability of inputs; 11. Poor access roads and inadequate transport result in high marketing costs, delays in acquisition of inputs and, therefore, lower incomes for farmers; Professor Firmino G. Mucavele

10. Major Crops Rural Poverty

11. Value chains: Concept and issues • The value chain is a concept which is described as the entire range of activities required to bring a product from the initial input-supply stage, through various phases of production, to its final market destination. • The production stages entail a combination of physical transformation and the participation of various producers and services, and the product’s disposal after use. Professor Firmino G. Mucavele

12. Value chains: Concept and issues 3. As opposed to the traditional exclusive focus on production, the concept stresses the importance of value addition at each stage, thereby treating production as just one of several value-adding components of the chain. 4. Research and innovation, human resource development and other support services form the environment in which all activities take place Professor Firmino G. Mucavele

13. Value chains: Concept and issues 5. Agricultural value chains tend to be more complex, to involve numerous interlinked activities and industries with multiple types of firms operating in different regions of one country or in different countries around the globe. 6. Sugar-value chain encompasses activities that take place at the farm the in rural settlements and industrial firm in the urban area. Professor Firmino G. Mucavele

14. Value chains: Concept and issues 7. Unlike producer-driven chains, where profits come from scale, volume and technological advances, buyer-driven chains yield profits from combinations of high-value research, design, marketing and financial services. 8. Profitability is greatest in the consolidated parts of global value chains that have high entry barriers for new firms. Professor Firmino G. Mucavele

15. Professor Firmino G. Mucavele

16. Agro-Value Chain: Lessons from Mozambique • Agricultural production, processing, distribution, marketing and storage of produce in Mozambique are disconnected and the policies and strategies associated to these activities are incongruent. ; • Value added in agriculture is a process of increasing the economic value and consumer appeal of an agricultural commodity; Professor Firmino G. Mucavele

17. Agro-Value Chain: Lessons from Mozambique 3. Food and agribusiness chains are greatly affected by consumers’ concerns regarding food quality and safety and the sustainability of food production and handling methods. 4. Societal concerns regarding GMOs, chemical residues and environmental impact have to be met in a competitive, increasingly global environment. Professor Firmino G. Mucavele

18. Agro-Value Chain: Lessons from Mozambique 5. Globalization, urbanization and agro-industrialization put increasing demands on the organization of agro-food chains and networks; Professor Firmino G. Mucavele

19. Agro-Value Chain: Lessons from Mozambique 6. Food and agribusiness supply chains and networks – once characterized by autonomy and independence of actors – are now swiftly moving toward globally interconnected systems with a large variety of complex relationships. In Mozambique these facts are not yet addressed appropriately through sustainable policies and strategies. Professor Firmino G. Mucavele

20. Agro-Value Chain: Lessons from Mozambique 7. The increasing integration of local and cross-border agro-food chains can be considered both a threat and a challenge for rural development. 8. Poor farmers who have limited resources and scarce access to markets and information meet major constraints for the adoption of technological innovations and may therefore be excluded from trade Professor Firmino G. Mucavele

21. Agro-Value Chain: Lessons from Mozambique 8. Bridging the gaps between local economic development and global chain integration asks for the emergence of new institutional and organizational networks that enable producers in Mozambique to meet business requirements and trade standards. Professor Firmino G. Mucavele

22. Agro-Value Chain: Lessons from Mozambique 9. It also requires a fundamental reorganization of information streams and institutional relationships, providing opportunities to smallholders to adjust their supply to consumers’ demands and to become a recognizable part of global sourcing regimes.  Professor Firmino G. Mucavele

23. Strengths, Weaknesses, Opportunities in Agro-Development Links 1. By revealing strengths and weaknesses, value chain analysis helps participating actors to develop a shared vision of how the chain should perform and to identify collaborative relationships which can lead to improvements in chain performance; Professor Firmino G. Mucavele

24. Strengths, Weaknesses, Opportunities in Agro-Development Links 2. For policy-makers, value chain analysis is a means of identifying corrective measures, investment priorities and development opportunities; Professor Firmino G. Mucavele

25. Overview of Major Crops in Mozambique - Cotton 5. The trading companies provide seeds, other inputs, and some extension services in return for the right to purchase the cotton at a price set annually by Ministry of Agriculture; 6. World cotton prices have declined sharply from US$0.70/lb. to US$0.40/lb. These falling prices contributed in part to the failure of one of Mozambique’s largest trading companies; Professor Firmino G. Mucavele

26. Agro-food chain strengths • The long term goals of the agricultural sector in Mozambique are to improve food security and reduce poverty by supporting the efforts of smallholders, the private sector and governmental and non-governmental agencies to increase agricultural productivity, agro-processing and marketing, while keeping a sustainable path for the exploitation of natural resources. Professor Firmino G. Mucavele

27. Agro-food chain strengths 2. If policies and strategies were defined accordingly, this would constitute a strength and the agro-food chains would be used for planning activities, monitoring and evaluation of agro-development links. 3. A large number of rural people derive their livelihood from agriculture and other related rural economic activities. Professor Firmino G. Mucavele

28. Agro-food chain strengths 4. Improved infrastructure since peace was established, markets are more integrated and prices are more stable; 5. There is increased cross-border trade with Swaziland, Malawi, Zambia, and Zimbabwe, with estimated total informal trade in maize over 200,000 tons. Professor Firmino G. Mucavele

29. Agro-food chain weaknesses • Institutional organization in Mozambique and incongruent policies don’t benefit agro-food chains. • Agricultural production is fragmented with increasing cost of production. • under-utilization of more effective modern technologies. • lack of research and development oriented to productivity improvements. Professor Firmino G. Mucavele

30. Agro-food chain weaknesses 5. Preference for utilizing foreign products in detriment of local produce. 6. Low levels of adoption of food safety standards. 7. Fragmented and inefficient distribution systems. 8. inadequate collection, storage and distribution facilities. 9. low levels of adoption of standards and formal quality systems. Professor Firmino G. Mucavele

31. Agro-food chain weaknesses 10. limited negotiating skills for building partnerships. 11. inadequate management and operational capacities. 12. New procedures and practices for organizing food supply networks – with direct ties between primary producers, processors and retailers – are not a practice yet, to cope with food safety and health demands. Professor Firmino G. Mucavele

32. Agro-food chain opportunities • A food-chain analysis allows decision makers as well as policy makers to evaluate consumers’ expectations for each agricultural commodity and explore value addition opportunities. • Analyzing specific requirements for agricultural product such as type of certifications to guaranty safety, quality is crucial to discover ways of adding value. Professor Firmino G. Mucavele

33. Agro-food chain opportunities 3. In Mozambique, there are large opportunities to add value to agricultural products through grading of products and certifications. 4. Through agro-value chain analysis in the processing technologies in the farm as well as in the agro-industry could increase opportunities for the agricultural products in Mozambique. Professor Firmino G. Mucavele

34. Agro-food chain opportunities 5. For instance: • is there a niche market in the domestic market or in the international markets? • Is there a possibility for organic products market? • What are the food labeling and packaging opportunities? • Are there opportunities in other sectors such as cosmetics, bio fuel and medical. Professor Firmino G. Mucavele

35. Marketing and Branding in the Agro- Food value chain • Agricultural marketing in Mozambique needs to be improved in terms of management, trademarks development and branding. • Agricultural products with given qualities, reputation or other characteristic essentially linked to international markets can sale for high prices and be preferred for exports. Professor Firmino G. Mucavele

36. Marketing and Branding in the Agro- Food value chain 3. Agricultural development requires good research services and agro-technological innovations for high productivity. 4. To provide incentives for researchers, scientists and innovators, there is a need for protection of plant varieties such as plant breeder’s rights, protection of technological innovation such as patents, and agricultural tools models. Professor Firmino G. Mucavele

37. Marketing and Branding in the Agro- Food value chain 5. The benefits of protection include market exclusivity and competitive advantage such as marketing rights, marketing references, favorable image and credibility as well as financing opportunities, possibilities to license or sell. 6. Food labeling and packaging is key to add value into the agricultural produce. Professor Firmino G. Mucavele

38. Regulatory and Policy Framework • Agricultural sector should facilitate the development of the product and service value chain necessary for minimal and value added products. • Agricultural sector should agree to develop small business enterprises capable of meeting and maintaining good international standards. Professor Firmino G. Mucavele

39. Regulatory and Policy Framework 3. Government should work with agriculture and all the sectors to develop scientifically new products, especially community-based and internationally-based products. 4. Governmentshould ensure that all international standards are developed as a part of the competitive strategy for the country. Professor Firmino G. Mucavele

40. Some Lessons and the Way Forward • Agriculture alone will not be sufficient to address the poverty and inequality in Mozambique. • Industries established along efficient value chains, can increase significantly the rate and scope of industrial growth. • Agro-industrial products offer much better prospects of growth than primary commodities. Professor Firmino G. Mucavele

41. Some Lessons and the Way Forward 4. To participate successfully in sustainable agro-value chains, Mozambique must cope with the numerous challenges and constraints posed by a continuously changing marketplace. 5. One necessary condition is that the overall macroeconomic framework and other sector investments must remain stable, including reducing the fiscal deficit and controlling inflation. Professor Firmino G. Mucavele

42. Some Lessons and the Way Forward 6. Greater accountability and transparency to reduce corruption are critical to improving the business environment. 7. Education is crucial for adoption of new technologies become. 8. Similarly, the health system must respond to the needs of poor smallholders, especially in dealing with HIV/AIDS. Professor Firmino G. Mucavele

43. Some Lessons and the Way Forward 9. As the Government embarks on a medium-term financial framework, one critical aspect is to include all expenditures in rural areas within the budgeting framework. This requires that all off-budget expenditures be identified and brought into the budget system. 10. Promotion of good business environment in rural areas cam accelerate agricultural commercialization. Professor Firmino G. Mucavele

44. THANK YOUOBRIGADOKANIMAMBO Prof. Doutor Firmino G. Mucavele